Channel Checks for Research In Motion Ltd (BBRY) Look Very Good Pre-Earnings: Misek

Peter Misek, CFA, CPA of Jefferies in a new report on Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) ahead of earnings. Results from suppliers Jabil/Wistron and another round of UK store checks lend continued confidence in the firm’s far above Street estimates for the May Q (Jef $4.1B/$0.50, Street $3.4B/$0.06) and Aug Q (Jef $3.9B/$0.37, St $3.3B/$0.14). Peter expects limited Aug Q guidance details but thinks sell-through will ultimately prove that BB10 is not just a one quarter channel fill phenomenon (as bears argue). Further details from the new note on Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) earnings (which are reported Monday morning) from Peter Misek, CFA, CPA of Jefferies below (Raymond James is also bullish on the phone company see report here):

Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) good results from suppliers Jabil and Wistron bode well for BB10

We believe Jabil and Wistron are the two main manufacturers of BBRY’s BB10 handsets. Recently, Jabil reported strong results in its May Q for its High Velocity segment, which we believe to be primarily sales to BlackBerry: 24% Y/Y (+13% guidance), +34% Q/Q. Aug Q segment guidance of +15% Y/Y (implies -4% Q/Q) is solid and we expect substantial upside. Wistron reported revenues for the month of May of +16% M/M and +21% Y/Y. While BBRY is a ramping customer for Wistron, it was <10% of Wistron’s revenues in 2012 with most of Wistron’s business from notebooks, which are quite weak. Wistron’s notebook ODM peers reported May sales of 0% M/M and -7% Y/Y, highlighting Wistron’s outperformance.

Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) build plan checks continue to point to upside to consensus expectations

We believe BB10 build plans continue at 2M+ per month vs. St 3M+ shipments in the May and Aug Q and vs. our est of 4M for each Q. We think that will offset May Q BB7 handsets potentially being 2M-3M vs. our 4M est and subscribers falling by 5M.

We surveyed hundreds of Orange, Vodafone Group Plc (NASDAQ:VOD) (LON:VOD), and EE stores in the U.K. to determine inventory levels for the Z10 and the Q10. For the Z10, we found only 3% of stores to have 5+ units in stock, 78% of stores had 1-4 devices on hand, and 19% of stores were out of stock. For the Q10, we found 19% of stores to have 5+ units in stock, 79% of stores had between 1-4 devices on hand, and 2% of stores were out of stock. We find recent reports mentioning large inventory levels to be inconsistent with our checks.

.BES 10.1 trial: BBRY MDM increasingly compelling

We were pleased with our trial of BES 10.1 on our iPhone and a beta of a new desktop VPN service. We believe enterprises could save $3-$10/month/user on data charges as email traffic is especially compressed.